Monday, 29 December 2014

Parrikar engages private defence industry to boost indigenous arms

By Ajai
Shukla

Business Standard, 28th Dec 14

For the
first time since the private sector was allowed into defence production in
2001, a defence minister has met face-to-face with private sector defence CEOs
to discuss the role they could play in boosting defence production in India.

On Saturday,
at the Taj Vivanta Hotel in Goa, Defence Minister Manohar Parrikar --- alone
except for a personal secretary --- met for three hours with captains of
private defence industry. Not one of his ministry’s five secretary-level
officers was in attendance. Nor was anyone from the public sector invited.

Major
issues discussed included the “Make” category of procurement; ways of
harnessing Micro, Small and Medium Enterprises (MSMEs); and boosting defence
exports.

The
industrialists who flew down to Goa for the meeting included Baba Kalyani from
the Kalyani Group, and the defence vertical chiefs of Bharat Forge; Larsen
& Toubro; Tata Advanced Systems; Godrej & Boyce; Ashok Leyland; Punj
Lloyd, Alpha Design Technologies; Zen Technologies; Data Patterns and Pipavav
Shipyard. Local Goa group, Dempo, also sent a representative. The Confederation
of Indian Industry (CII) organised the meeting.

Business
Standard has been briefed on the meeting by three CEOs who attended. All of
them agree that, after thirteen years of operating from the sidelines under three
successive defence ministers --- George Fernandes of the National Democratic
Alliance (NDA); and Pranab Mukherjee and AK Antony of the United Progressive
Alliance (UPA) --- Parrikar’s readiness to interact face-to-face is an encouraging
indicator of change.

“We spoke
frankly and Mr Parrikar listened carefully, interjected frequently and took notes
during the meeting. For the first time in a decade, we (private sector defence
companies) believe we will be allowed to use our capabilities in the defence of
India”, says HS Shankar, who attended the meeting as chief of defence
electronics company Alpha Design Technologies.

A central
issue discussed was the “Make” procedure, which was devised to allow private
companies a larger role in designing and building defence equipment, with the
ministry of defence (MoD) reimbursing 80 per cent of the development cost.
However, since the “Make” procedure was instituted in 2008, not a single
project in this category has been successfully floated by the MoD.

A new
“Make” procedure has been in the pipeline for years, but there is little
consensus on its form, even amongst private industry. Parrikar indicated the
new procedure would be finalised by end-January.

Industry
representatives suggested that no programmes be tendered under the “Make”
procedure until there was clarity on its final form. They cautioned that it was
very different from the prime minister’s (PM’s) “Make in India” initiative,
which is about boosting manufacture. The “Make” procedure, in contrast, is
about developing design capability and intellectual property (IP) in the
country.

Parrikar requested
CII for a note that explained IP issues, including the critical issue of who
should own the IP generated through the “Make” procedure --- the company that
generated it, or the MoD which paid for it.

Zen
Technologies proposed that the MoD not accept low indigenous content of 30-50
per cent, which the current Defence Procurement Procedure mandates in certain
categories of procurement. Instead, 90 per cent indigenisation should be aimed
at. Parrikar requested for a paper on a new procurement category, called “Pure
Indian”, which would demand near-total indigenisation.

Parrikar
proposed an assured R&D work share for MSMEs under the new “Make”
procedure. He mooted a national registry of defence MSMEs, based on capability
criteria. Once registered, an MSME should be supported with exemptions from
burdens like Earnest Money for defence tendering.

Parrikar
highlighted the need to boost defence exports, a requirement the PM has also
stressed. He proposed issuing a negative list and positive defence export list.
While no exports would be permitted to countries on the negative list, those on
the latter would require no export clearances.

Also
discussed was the relative success of Indian Space Research Organisation (ISRO)
compared to the Defence R&D Organisation (DRDO). Many ascribed ISRO’s
success to the autonomy that came with being directly under the PM. The defence
minister revealed that he had ordered greater financial powers to the DRDO’s
departmental heads. Each of these Director Generals, who oversee specific
technology areas like aerospace, missiles and underwater systems, will now be empowered
to spend up to Rs 150 crore. The onus of delivering usable defence equipment
would be squarely on their shoulders.

1 comment:

The Indian private sector is highly corrupt takes shortcuts and unethical towards workers and managers . Rent seeking and giving bribes is their forte and the defence minster willbe wise to have public private consortium approach where the public sector foots the land and buildings for the projects the trained manpower of defence psus and ordnance factories is amalgmated with private workers and managers for effeciency , the private sector and public managers jointly select technology and machines and the board of the company has private sector lumanries , bankers , cas on board with public sector mangers and technocrats .running these enterprises be run with private sector effeciency govt sector ethics with no control or reporting to mod babus or mantris